Greek Deal and US Payroll

The struggle between the Greek government and private bondholders to reach an accord on a debt-swap deal has prompted traders to remain risk averse. With a light European economic calendar today, market participants will continue to eye Greek talks wherein a decision is likely to be delivered on the weekend. Across the Atlantic, markets are focused on non-farm payrolls data due today to gauge the sustainability of the economic recovery. In the UK, data just released indicates that services PMI unexpectedly improved for January. This comes on the back of the Lloyds business barometer, released earlier today, showed a significant improvement for January.

Pound Sterling – UK Markets

The Pound has gained against both the Euro and the US Dollar this morning after Lloyds business barometer improved significantly to a reading of -11 for January from a reading of -23 recorded for the prior month. With the BoE’s monetary policy meeting around the corner, the Monetary Policy Committee member, Adam Posen, unnerved markets by suggesting an inclination towards an extra £75 billion stimulus for the economy. To add to concerns, the NIESR warned that Chancellor's austerity measures are causing “lasting damage” to the British economy. Data just released indicates that services PMI unexpectedly improved for January, adding to optimism following the positive manufacturing activity data released earlier this week. With an apparently quiet day ahead in Europe as well, the Pound is likely to trade range bound against the majors.

US Dollar – US Markets

Sterling-US Dollar pair continued to trade above the 1.5800 mark ahead of the crucial non-farm payrolls data due later today wherein the unemployment rate is expected to remain unchanged at 8.5%. This jobs report comes on the back of yesterday’s upbeat jobless claims data. However, the Federal Reserve Chairman, Ben S. Bernanke, seemed unimpressed by the improving conditions, as he stated that the pace of the recovery has been frustratingly slow. The comments are in stark contrast with the Dallas Fed President, Richard Fisher’s view that US economic reports have been “pretty good”. Among other major releases due today, factory orders growth is expected to slow for December, while the ISM non-manufacturing composite index is likely to improve for January. We believe that non-farm payrolls data will be a key influence on the movement in the US Dollar today.

Euro – European Markets

The Euro has failed to make any meaningful gains against the majors as Greece and its creditors struggled to reach an agreement on a debt swap deal. Reports suggest that increased opposition towards additional spending cuts demanded by lenders coupled with disagreement over the involvement of the ECB acted as major stumbling blocks in the process. To add to the gloom, Luxembourg Prime Minister, Jean-Claude Juncker, indicated that Greek bond-swap talks with private creditors are “ultra difficult”. Moreover, markets remain cautious ahead of Eurozone’s retail sales data which is expected to indicate that sales in the region continued to decline annually for December. Data released earlier today indicated that services PMI in Eurozone and Germany fell for January. Meanwhile, finance ministers of Germany, Finland, Luxembourg and the Netherlands are expected to meet later today to discuss issues surrounding the region’s economy.

Other Currencies – Highlights

The Canadian Dollar is trading marginally higher against the US Dollar ahead of the key Canadian employment data scheduled for release later today. Market expects a positive report with a steady unemployment rate at 7.5% for January. Slow pace of expansion in the Chinese non-manufacturing sector and persistent concerns over Greek debt talks have been taken in stride by investors. Meanwhile, data released earlier this week indicated an unexpected contraction in the Canadian economy for November, raising prospects for the Bank of Canada to lower interest rates.